TKEG Expat™ (Test) Luxembourg Corporate Tax Guide

[b]Standard Corporate Income Tax Rate: [/b]
Luxembourg taxes the worldwide income of its business residents, while non-residents are only taxed on Luxembourg-source income.

As of tax year 2025, businesses with taxable income lower than EUR 175,000 are subject to CIT at a rate of 14%. Businesses with taxable income between EUR 175,000 and EUR 200,000 are subject to CIT computed as follows: EUR 24,500 plus 30% of the tax base above EUR 175,000. The CIT rate is 16% for companies with taxable income in excess of EUR 200,000.

[b]Additional Tax[/b]
The solidarity surtax is 7% of the corporate income tax amount.

[b]Municipal Business Tax[/b]
Municipal business tax for Luxembourg City is 6.75%. The effective combined CIT rate (CIT, solidarity surtax, and municipal business tax) in Luxembourg City is 23.87% as of tax year 2025.

[b]Luxembourg VAT Overview:[/b]
Goods and services occurring in Luxembourg at the standard rate of [b]17%[/b] (EU minimum VAT)
[ml][ol][li indent=0 align=left]VAT is subject to [b]14%[/b] on certain transactions (e.g., management and custody of certain wines, advertising brochures, securities)[/li][li indent=0 align=left][b]8%[/b] (e.g., gas or electricity supply)[/li][li indent=0 align=left][b]3%[/b] (food [except most alcoholic beverages]); Pharmaceuticals; Books (including e-books) books; radio and television programs (other than adult entertainment); Shoes, accessories and clothing for children under 14 years old.[/li][/ol][/ml]Banking, financial, insurance and reinsurance transactions are generally tax-exempt. VAT paid on expenses directly related to these transactions cannot be recovered, except in relation to the provision of services to persons outside the EU. Other VAT-exempt transactions, such as exports and related transports, allow suppliers to recover input VAT on related costs.

[b]Payroll Tax: [/b]
Payroll taxes must be withheld and paid by the employer. The tax rate is based on the employee's income, with the highest payroll tax rate being 42%. In addition, the solidarity tax is up to 9%.

[b]Social security insurance: [/b]
The social security contributions that employees must contribute are as follows:
[ml][ol][li indent=0 align=left]Critical illness insurance: 3.05% regular salary, monthly cap of €10,709.97 (estimated annual cap of €128,519.64 as of January 1, 2020).[/li][li indent=0 align=left]Pension: 8% of total remuneration, capped at €10,709.97 per month (estimated annual cap of €128,519.64 as of January 1, 2020).[/li][/ol][/ml]

[b]Overview of import and export taxes:[/b]
Many imported goods from outside the EU are subject to customs duties and excise duties. The tariffs and rates applied to different goods vary widely and change frequently.
Excise duty is levied on certain consumer goods such as cigarettes, cigars, mineral oil, alcohol products. If it is used only as a raw material, no consumption tax is levied. If the goods are exported, the excise duty can be refunded.

Payroll taxes have to be withheld by the employer. The top payroll tax withholding rate is 42%. A solidarity tax of a maximum of 9% of tax must also be applied.